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Which Street Are You On?

At times, though, Bloomberg’s reminders to angry New Yorkers about the financial industry’s importance to the city’s economy have sounded like he’s scolding an addict for lack of gratitude to his dealer. As the tales of innovative greed at Goldman Sachs and elsewhere have accumulated, the mayor has stuck to his refrain about depending on financial-industry tax revenue to pay cops and firefighters and teachers, until the message seems to become, “Wall Street may be run by thieves, but they’re our thieves.” Even if the mayor is correct about the potential damage to the city’s budget, Bloomberg could have made a stronger case for how constraining the financial industry would be more painful to the city—and to the rest of the country—than the massive wounds inflicted by Wall Street’s rigged-casino culture. Instead, he’s declaimed publicly about doing “what’s right for the country, not what is politically popular at the time,” and privately he’s chortled along with reprobate Republican senator Mitch McConnell’s criticisms of Schumer.

Schumer was peeved—and puzzled. The senator’s allies claim that the mayor hadn’t brought up financial reform in weekly phone chats between the two principals, even as Bloomberg talked up the issue publicly, making Schumer’s camp suspicious that the mayor is restless at City Hall and looking for a national platform. Schumer, by contrast, was avoiding the spotlight and missing the chance to become the spokesman for principled reform. The senator was tight-lipped about Wall Street, his defenders claim, not because he was cravenly ducking the issue but because he’d made a much different strategic judgment: that combativeness like Bloomberg’s invites those who hate New York and Wall Street to vote for harsher measures.

Maybe it has been part of his master plan all along, or maybe he’s been flushed out by the mayor’s hectoring, but Schumer is finally speaking more forcefully as he tries to walk a fine line. “Wall Street did a lot wrong,” he told me late last week. “Listen, we have 10 percent unemployment not because of some proposed bill but because a number of financial firms went way over the top. At the same time, it’s New York’s most important industry.”

Two weeks ago, the mayor and the senator cleared the air in a phone conversation on the same day that Politico wrote about their rift. The next day, after Obama’s Cooper Union speech, the mayor finally got specific, saying he favors a consumer-protection agency and public trading of derivatives; he vehemently opposes Arkansas senator Blanche Lincoln’s proposal to force the spinoff of the swaps business.

Bloomberg may well be right about the ramifications for the city. “[Franklin] Roosevelt’s hands were free to impose regulation after the crash because there was no global financial industry in the thirties,” says NYU finance professor Thomas Philippon. “Today the threat of jobs moving to Hong Kong and Singapore is real.” Yet even if the more drastic measures become law, it’s still implausible that banks would bolt wholesale. More likely, after a period of wailing, Wall Street’s biggest players would get busy figuring out how to profitably exploit the new rules.

Bloomberg and Schumer talked again last Wednesday as the Wall Street bill headed to the Senate floor. The mayor and the senator appear to agree on most points, a bank tax being one significant exception. But that doesn’t mean the skirmishing is finished. In 2006, Bloomberg operatives bolstered Joe Lieberman’s Connecticut reelection campaign. Now similar help has been offered to Senate Majority Leader Harry Reid, who is in trouble in Nevada. A Reid win would end Schumer’s chances of rising to Senate majority leader next year. Surely the mayor merely admires Reid and wants the Silver State to be represented well in our nation’s capital. Because, as he’s been trying to explain to his good friend Chuck Schumer for the longest time, that’s all he wants for New York.